By Prof. Enrique Soriano
Over the weekend, I found myself in Taiwan, fulfilling my role as a Board advisor to a family-owned conglomerate engaged in real estate and manufacturing. My task is to provide an objective audit of their 2025 strategic plan. Having mentored the CEO successor for the past three years, I’ve witnessed his unwavering respect for governance and transparency, essential traits for navigating the challenges of leading a multi-generational enterprise. This ongoing collaboration has underscored a universal truth: governance is the cornerstone of resilience in family businesses, particularly in the face of external uncertainties.
Governance: The Bedrock of Family Business Success
Governance in family businesses transcends rules and protocols—it embodies a commitment to structure, clarity, and fairness. It is about respecting the chain of command, honoring signed agreements, and empowering both family and non-family members to perform their roles effectively.
As businesses evolve, the interplay of personal relationships and professional responsibilities becomes increasingly complex. Strong governance provides the framework to navigate these dynamics, ensuring decisions are made with the enterprise’s best interests in mind.
Respecting Signed Family Agreements
Family agreements are the foundation of harmony and shared purpose in family businesses. These agreements, often formalized as constitutions or charters, outline roles, responsibilities, and expectations for family members involved in the business.
In 2025, the stakes are high, and adherence to these agreements is paramount. Respecting these commitments signals accountability and a shared vision, reducing potential conflicts that can disrupt operations. Disregarding these agreements, on the other hand, erodes trust and undermines the governance framework essential for navigating external challenges.
Commitment to Policies and the Chain of Command
For a business to operate efficiently, there must be clear lines of authority and decision-making. Family members must respect the chain of command, particularly in organizations with professional non-family executives. Interference or bypassing established structures creates confusion and disrupts workflow, ultimately demoralizing non-family employees.
By committing to policies set forth by the board and the business council, family members send a strong message of professionalism and unity. This commitment allows managers and employees to execute strategies with confidence, knowing they have the full backing of the leadership.
Empowering Non-Family Professionals
Non-family executives play a vital role in the success of family enterprises. Their expertise, objectivity, and operational insights often complement the vision and passion of family leaders. However, for these professionals to thrive, they must operate in an environment free from undue interference.
Family members must respect boundaries and allow non-family executives to manage their respective domains. This trust not only improves organizational efficiency but also reinforces the credibility of the business in the eyes of stakeholders.
The Role of Governance Amid 2025’s Challenges
Strong governance is not just about maintaining order—it is a strategic advantage in turbulent times. A well-governed family business is better equipped to:
- Navigate external uncertainties with cohesive leadership and aligned decision-making.
- Attract and retain top talent, who value a clear and professional work environment.
- Strengthen stakeholder confidence, including investors, clients, and suppliers, who see the business as a reliable partner.
- Preserve family harmony by minimizing disputes and ensuring fair treatment of all members.
A Call to Action to all Family Enterprises: Strengthen Governance!
As we move into an era of heightened uncertainty, family businesses must prioritize governance as a core strategic pillar. This means:
- Reviewing and updating family agreements to reflect current realities and challenges.
- Conducting governance workshops to align family members on the importance of structure and compliance.
- Creating accountability mechanisms to ensure policies are followed and enforced.
- Fostering a culture of mutual respect, where personal interests do not overshadow the collective good.
Leading by Example
As a mentor and advisor to family enterprises, I have seen firsthand the transformative power of governance. In my current work, the CEO -successor has embraced governance as a cornerstone of his leadership. By respecting agreements, empowering non-family professionals, and fostering a culture of accountability, the business has not only weathered external challenges but thrived in the face of them.
2025 will undoubtedly test the resilience of family businesses. However, those that commit to governance—respecting agreements, adhering to policies, and empowering their teams—will emerge stronger, more cohesive, and better positioned for the future.
By embracing governance as a shared responsibility, family businesses can transcend the challenges of the present, ensuring a legacy of success for generations to come. Let us commit to this path, allowing our enterprises to not just survive but thrive in the years ahead.
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